Summer Refresher: ABCs Of Intellectual Property

Talk of the ABCs either brings up thoughts of school or the sales quip “Always Be Closing.” Of course, being that it is summer and very hot around the nation no one is thinking of school, but I think having a primer on intellectual property (IP) never hurts in any season!

Over the past ten days, I have spent many hours with numerous entrepreneurs in various situations and these interactions inspired me to share my top four IP tips on a startup’s most valuable assets. To start, I have a special bonus business tip:

I have had several people ask why they should bother forming a company or LLC before applying for patents? To back up the bus, the creation of your business entity is not just about patents and intellectual property, it’s about protecting your personal assets by limiting your liability. A favorite business law professor of mine once quipped that recommending sole proprietorship or no business entity formation was malpractice.

Tip #1: Remember to check your IP for items that may require trademark and/or copyright protection because they are not interchangeable.

Although these two IP protections are not the same, it can be a bit confusing because some items can be both copyrighted and trademarked, i.e., slogans or tag lines. A copyright means that you are the author and have the rights to control the use of what you have created whereas a trademark is about the brand promise or guarantee to the customer in exchange for the exclusive use of the mark.

For example, because Pepsi® registered their trademark with the federal government, Pepsi can market their products nationally without worrying about another company legally naming their soft drinks Pepsi. When a Pepsi drinker opens a can, they are confident that it will be Pepsi and not a rival brand.

A copyright is about protecting the author or creator of the work, not the consumer. So if Pepsi creates a great song, the company has the copyright or right to control who copies or uses the song. As the copyright owner, you can decide how and when others can use your work.

Tip #2: Do an evaluation of the costs and benefits of patents for your products and company with full knowledge of your rights.

A patent is not the right to operate or create a product but only the right to stop others from making, selling, or using what you have patented. For example, if you patented a retractable eraser on a pencil, you would only have the right to stop others from making your version of that eraser. You would not be able to make your own mechanical pencil without permission, usually in the form of a licensing contract, from the mechanical pencil patent holders.

Do not get me wrong; I am not saying that patents are not worth it. In the example of the mechanical pencil, you can leverage the value of your patent by licensing the new retractable eraser to the mechanical pencil manufacturers.

Tip #3: Ensure that your trade secrets are not only kept secret but that you take the required reasonable steps as outlined by your state to protect them. This is a time to seek professional advice!

In my opinion trade secrets are the unsung heroes–your secret sauce in the form of proprietary information–and they are not given enough credit as an affordable way to protect IP. If the Coca Cola® recipe and formula had been patented, it would have long ago been released to the public after the patent expired. As a secret, its life is indefinite.

Simple items such as customer lists, supplier lists, system integrations, and so on, can be trade secrets if they are providing you a competitive advantage and are reasonably protected.

Tip #4: Remember, when you are hiring, good contracts protect both sides and are a form of IP protection.

The relationship between payment and ownership is a topic I have previously written on, especially when it comes to not having work done for you on a handshake and developing good contracts, but in my opinion the misconception that “if you pay for it you own it” cannot be repeated enough. All contracts with independent contractors you hire need to include wording that transfers all the ownership of anything created to your company.